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Why does the US tax people based on citizenship? (feddit.org)

submitted 11 hours ago by TacticalRaptor@feddit.org to c/asklemmy@lemmy.world

9 comments fedilink hide all child comments

The only “way” to really avoid it is renouncing the American passport (if they are a naturalized citizen of the country they have moved to first). Like this: the individual has moved abroad to another country under an US passport at first, but they still owe taxes to the US government despite them not physically being there even though they’re earning a foreign paycheck (until they surrender their passport for another not considering dual citizenship).

Why don’t digital nomads consider naturalization rather than living under a Golden Visa? I know that Portugal or Spain for instance is popular towards digital nomads, but should they renounce their American passport into becoming a Spanish or Portuguese citizen? Also, why don’t Western expats living in Dubai consider Emirati citizenship (they do not recognize dual citizenship, though) if they consider the UAE their new home?

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[–] oyfrog@lemmy.world 7 points 9 hours ago

They don't, you're just obligated to report your global income as a US citizen. This isn't a big deal if you plan to never go back to the US to live there, but if you do (or aren't sure), this becomes a major issue because all those years you didn't file your taxes with the IRS makes you effectively a tax cheat whether or not you owe any taxes at all.

If you pay income tax to another foreign government (that has a tax treaty with the USA) and you earn below the threshold for an individual or a household, then you don't pay taxes at all. In order for the IRS to determine this they need to know how much you made. I don't know what the actual threshold is for individuals, but in the 5 years that I've been living outside of the US, I haven't paid a single cent in US income tax. It's a pain in the ass, but whatever, you get used to it.